Ease of doing business is key for sub-Saharan Africa

In focus

Written by

Kingsley Iweka

In focus

Written by

Kingsley Iweka

For sub-Saharan Africa to make significant strides in its socio-economic transformation, ease of doing business is key. Mauritius has set a good example, says Kingsley Iweka

This article was first published in the September 2017 Africa edition of Accounting and Business magazine.

It’s no secret that businesses in sub-Saharan Africa face several barriers when it comes to ease of doing business, despite some of the fastest growing economies in the world being located in this region. According to the World Bank’s factsheet, Doing Business 2017: Equal Opportunities for All, Mauritius has the highest ranking at 49, while large economies like Kenya, Uganda and Nigeria rank 92, 115 and 169 respectively.

Of course the relatively low positions of African economies come as no surprise. The ‘doing business’ ranking assesses how easy or difficult it is for small to medium-size businesses to start up and operate in line with relevant regulations. Aspects of regulations around 11 key areas in the lifecycle of a business are monitored and measured: starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting minority investors; paying taxes; trading across borders; enforcing contracts; resolving insolvency (bankruptcy); and labour market regulation. For example, economies with better bankruptcy laws as measured by the World Bank tend to have more credit (access to finance) available to the private sector.

For the region to continue to make significant strides in its socio-economic transformation, ease of doing business must become a top area of focus. Key barriers such as corruption, government economic policies, poor infrastructure, regional conflicts and terrorism need to be addressed, and thoroughly. It might be helpful for African governments to form regulatory reform committees to focus on improving performance in the Doing Business rankings, as a measure of competitiveness. This would put righteous pressure on governments to improve their position in this regard.

Mauritius casts a shining light across Africa in this regard. It ranks top in terms of access to electricity, protecting minority investors, crossborder trade, enforcing contracts, resolving insolvency and tax payment. For example, it takes 152 hours to pay taxes in Mauritius, compared with 261 hours globally.

Indeed it is no wonder that Mauritius is much more attractive as a place to live than most other African countries. A brief comparison of data for Mauritius versus Uganda shows that:

Mauritius has a GDP per capita of US$20,500 while Uganda has a GDP per capita of US$2,100, meaning that a person would make 89.8% less money each year in Uganda.

In Mauritius, 8% of people are below the poverty line. In Uganda, 19.7% are. That means one would be 2.5 times more likely to be below the poverty line.

In Mauritius, 99.9% of people have access to clean drinking water. In Uganda, it’s 79%.

In Mauritius, life expectancy is approximately 75.6 years, while in Uganda the average is 55.4.

For most of the sub-Saharan African region, the areas most in need of improvement are access to electricity, crossborder trading and paying taxes. In getting electricity, for example, it takes an average of 120 days to obtain a permanent electricity connection to the grid, compared with the global average of 93 days.

If the region can prioritise ease of doing business and narrow the gap with the rest of the world, it will go a long way to improve its economic outcomes, as Mauritius has demonstrated so remarkably.

This month’s guest columnist, Kingsley Iweka, is the founder/editor of Africa-OnTheRise.com, based in Lagos, Nigeria